The three-month 90-strike put is priced at $2 and the three-month 100-strike put is priced at $7. What is the maximum possible net payoff on a bearish vertical spread using these options?
A) $5
B) $7
C) $8
D) $10

Question

Quizplus · Accepted Answer

The maximum payoff of a bearish vertical spread is the difference between the strike prices minus the net premium paid. Here, the difference between the strike prices is $10 (100 - 90), and the net premium paid is $5 (7 - 2), so the maximum payoff is $10 - $5 = $5.

The Three-Month 90-Strike Put Is Priced at $2 and the Three-Month